We have recently upgraded our recommendation on FUJIFILM Holdings Corporation (FUJIY) from Underperform to Neutral.
We hold optimism toward the company’s huge talent pool and enviable brand equity, which will support its product portfolio in response to growing market needs. Also, Fujifilm’s continued focus on technological innovation is expected to keep it abreast of the growing pace in the ever-changing digital market.
Fuji’s diversified sales bases across United States, Europe and larger parts of Asia is anticipated to strengthen the company’s demand across these regions while boosting its financial results over the coming quarters.
The company’s margin management tactics are quite encouraging and looks to be impressively beneficial for the long term.FUJIFILM’scost-effective business structure looks favorable and is anticipated to generate sustainable, profitable growth. Also, thestructural reform programs are also expected to effectively counter rising operating costs and expenses.
The company’s strong promotional efforts are also expected to increase sales and ensure significant value for shareholders. Adding to these, the company’s continued proactive investment in priority business fields looks significant.
However, concern remains as we witness cutthroat rivalry from Fuji’s competitors like Canon Inc. (CAJ), who are in the continuous process of developing, launching and marketing hi-tech digital expertise worldwide. Moreover, overcapacity in photo-imaging and photographic films sector threatens the company’s traditional businesses.
Surging prices of raw material like silver and aluminum impact margins. Moreoever, a significant portion of the company’s internationally generated income falls prey to exchange rate fluctuationswhile hurting its profitability.
Risk remains within the company’s domestic and international market as well. The global economic fluctuationsand slower-than-expected growth rate in the U.S. remains a matter of concern for the stock. On the other hand, the lingering effect of the Great East Japan earthquake and floods in Thailand in 2011 continue to jeopardize Fuji’s earnings stream in the domestic market.
The company has a Zacks #2 Rank, implying a short-term (1-3 months) ‘Buy’ rating.
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